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EMI to global trade group: Revamp funding or we quit

Letter to IFPI threatens resignation

In a move intended to cut costs and force a restructuring of music industry trade groups, EMI has tendered a conditional resignation from the International Federation of the Phonographic Industry.

A working group of major-label executives has been discussing a trade-group consolidation for months, a source said, particularly a merging of London-based IFPI, the industry's international trade body, and U.S. trade group the RIAA. But EMI's exit letter is the most concrete indication that a great deal of urgency is attached to those discussions.

The resignation would go into effect March 31 unless "discussions with the other major labels over the future structure and funding of the IFPI and the national industry bodies … lead to a solution that we are able to support."

EMI let the IFPI know of its decision in a Dec. 21 letter obtained by music industry trade publication Billboard from EMI general counsel Chris Ancliff to IFPI chairman and CEO John Kennedy.

"We feel that the most pragmatic approach is for EMI to serve notice now, but to express our willingness to continue to fund the IFPI on the current basis through the end of March 2008," Ancliff's letter reads. "If, as I hope, we have by then found a new funding structure, we would intend to re-establish our membership on that new basis. If not, we would discontinue funding beyond 31 March."

Said the source: "What can be accomplished by one global trade group would be preferable and more cost-efficient than two. The challenges are structure and operation: how the global group would communicate with regional groups, what their mandate would be, how they would be organized, who would lead it. The initial sense is it would be neither (RIAA chairman and CEO Mitch) Bainwol or Kennedy. But it's obviously very early in this process."

Another source who has taken part in these discussions characterized them in a slightly different light.

In November, EMI Group chairman Guy Hands said that it costs the major labels $250 million globally per year to support the international body plus and its affiliates, the RIAA and British Phonographic Industry.

An IFPI spokesman countered that, saying the group's overall cost to the four majors coming in at "around €15 million ($30.9 million) annually." The RIAA tax return for the year ended March 31, 2006, listed $44.9 million in membership dues.

But according to multiple sources with knowledge of the discussions, the working group, which does not include representation from the IFPI or the RIAA, seeks more than just cost-cutting measures. "It's more about making sure that the organizations and the way they are structured make sense and are in synch with the way the business operates now," one source said.

It was unclear whether EMI is considering a similar resignation from the RIAA. EMI and RIAA spokespersons declined comment.